Not broken, just needs to constantly adapt and change just like the start-ups and entrepreneurs they invest in.
Just as in any of the areas of finance, over time there are winners and losers for their return. At the end of the day, it all comes down to all kinds of market forces, the economy, and what their LPs want.
Venture investing is a high risk and potentially high reward model. There will continue to be changes necessary and challenges due to market forces (crowdfunding, online forums like AngelList, allowance of general advertising for certain fund raising under Reg D, etc.).
At the end of the day, venture capital is a useful tool and is a necessary for the type of high risk investing used to start cutting edge new companies.
More on my take on the use and necessity at "Why Venture Capital is not Vulture Capital."